1. Field of the Invention
This invention relates to inventory management and, more particularly, to inventory disposition.
2. Description of the Related Art
In order to offer customers a variety of items readily available for delivery, many merchants (whether engaging in electronic or conventional “brick and mortar” commerce) hold various quantities of such items within inventory facilities. Keeping items in inventory may serve to buffer variations in customer demand or a manufacturer or distributor's ability to supply various items. For example, different items offered for sale by a merchant may have different manufacturer lead times. Holding quantities of such items as inventory may enable a merchant to offer consistent availability of these items to customers despite the different lead times.
Many merchants employ conventional inventory management schemes that attempt simply to ensure that the inventory on hand is sufficient to cover expected customer order volumes for a particular period of time. That is, such conventional inventory management schemes focus on whether there is enough inventory on hand to meet projected demand. However, storing inventory is not without cost. For example, providing a physical facility in which to store inventory presents recurring infrastructure costs directly attributable to the inventory items stored in the facility. Further, while items are in storage awaiting sale, debt or capital costs associated with acquiring the items may accumulate. When inventory holding costs are considered, having too much inventory may also be a concern, as accumulating costs may erode profitability.
However, taking holding costs into account when optimizing inventory presents challenges. Different items may incur different types of costs and present different sales dynamics. In principle, intervention may be undertaken to mitigate the costs of underperforming items, for example by reducing the number of such items on hand. However, aggregating costs across such different items may obscure inventory management intervention opportunities at the item level. Further, multiple disposition options may exist with respect to a given item, not all of which may equally satisfy desired constraints on intervention outcome.